Multifamily construction activity has decreased in Dallas-Fort Worth for 11 straight quarters, but the metro is still dealing with the issue of oversupply not being absorbed as quickly as the industry anticipated.
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MRI Software’s Tim Anderson, Stillwater Capital’s Aaron Sherman, Realty Capital Residential’s Alex Brown, Sparrow Partners’ Rebecca Everitt, Billingsley Co.’s Sumner Billingsley and ZOM Living’s Jason Haun
The metro continues to have a huge development pipeline, but Colliers’ DFW multifamily market report for the first quarter shows occupancy has been trending upward and absorption is expected to follow suit in the coming months. That momentum and the fact that lenders have returned to the market have Billingsley Co. partner and President of Multifamily Sumner Billingsley optimistic about the sector’s future.
“Leverage is back to where it was a few years ago … and spreads are tightening,” Billingsley said during Bisnow’s Dallas-Fort Worth Multifamily Annual Conference on May 12 at the Marriott Dallas Allen Hotel & Convention Center in Allen. “All of that is a really good indicator that things are moving in the right direction.”
DFW’s occupancy rate rose to 93.2% and is expected to continue in that direction. The region had 43,000 units under construction during the first quarter, but just over 22,000 of those are expected to be delivered within the year.
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Forthea’s Greg Cox, The NRP Group’s Nick Walsh, city of Dallas’ Andreea Udrea, Humphreys’ Robin Bellerby, Mitchell & Sarkisyan Holdings’ Sharif Mitchell and Dallas City Homes’ Jason Brown
Colliers also forecasts that DFW’s pipeline will be less than 26,000 units under construction by the first quarter of 2027.
Billingsley said she expects DFW’s multifamily sector will be in a “really good place” by the beginning of 2027. Renewals have been incredibly strong for Billingsley Co., and the firm’s negative lease trade-outs have significantly improved.
“The market’s doing what it’s supposed to do — it’s correcting,” Billingsley said.
One headwind the multifamily market is facing as it works through the oversupply is Senate Bill 840, which became law last September. It allows multifamily to be built by right in any commercially zoned areas of the state’s biggest cities without the need for zoning hearings.
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Elauwit Connection Inc.’s Taylor Jones, Mill Creek Residential’s Michael Blackwell, Lang Partners’ J Brandon Hancock, Nucor Corp.’s Jim Freiberg, McGough’s Matt DiCamillo, Anthem Development’s Ross Frankfurt and Town Cos.’ Brian Alef
The bill was designed to address the state’s worsening housing shortage, but many North Texas cities have added extra layers of regulation to slow its use. The law applies only to Texas cities with populations greater than 150,000 in counties with more than 300,000 residents.
Most of the 19 cities affected by the law are in North Texas.
While Billingsley sees the usefulness of the law, she called it a “double-edged sword” since it could delay the region’s correction from its oversupply issue.
“It could motivate a new flood of supply to hit those markets that are still in the process of absorbing,” she said.
While debt is back in the market in a significant way, Realty Capital Residential President Alex Brown said equity is not. So even with SB 840 allowing multifamily development in more areas, equity won’t be on board with all those prospective projects.
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Blue Stream Fiber’s Sam Reynolds, KTGY’s Ray Tse, Kairoi Residential’s Olivia Loudis, Colt Builders’ Jane Imperatore and Larkspur’s Carl Anderson
Equity has been incredibly selective, generally only going to repeat clients with deals that have a major competitive advantage, Brown said.
Monthly rents climbed during the first quarter to an average of $1,483 per month, along with the uptick in occupancy, according to Colliers’ report. But the record amounts of supply delivered over the past few years have put pressure on rents throughout the metro.
Developers have offered widespread concessions to new Class-A properties to lease up. While some submarkets have reached stabilization, ZOM Living Senior Vice President Jason Haun said those concessions are still affecting rents.
“Concessions can burn off really fast, but they haven’t,” he said. “They’re sticking around, and you may have a submarket that’s been stabilized, but … the adjoining submarkets in all directions may still be working through lease-ups.”
Many of those projects working to lease their units are in DFW’s outer suburbs, with Haun adding that 12-week concessions and $1,000 gift cards are still being offered in some suburban submarkets.
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Elite Home Fitness’ Jennifer DiCecco, Corgan’s Stephen Lohr, StreetLights Residential’s Greg Coutant, Trammell Crow Co.’s Kevin Hickman, Renew’s Tim Ryan and Arcadis’ Jan Steingahs
While DFW’s densest areas haven’t had as many new multifamily starts as the suburbs, Haun said there has been positive momentum in select pockets of the urban core.
“Not enough to make sense of going and starting a high-rise quite yet, but a vastly different scenario than a lot of the fringe suburban markets,” he said.
Tariffs and the conflict in Iran haven’t had a significant impact on construction pricing in DFW. However, the slowdown in the region’s pipeline has made contractors and trades groups more competitive.
Without the huge pipeline of projects, contractors and trades groups don’t have anything to fall back on if they miss out on a deal, Billingsley said.
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Kensington Vanguard National Land Services’ Zach Sams, BridgeInvest’s Alex Horn, PGIM Real Estate’s Amber Rao, JPI’s Payton Mayes, George Smith Partners’ Matt Huberty and Mitsui Fudosan America’s Jacob Moore
That has been a benefit to her company, but Billingsley said it doesn’t change what developers need to focus on to be successful.
“At the end of the day, quality prevails. If you build it right, you build it thoughtful, it’s timeless,” Billingsley said. “People will always be drawn to quality, so I think that’s our responsibility, and that’s the opportunity, and that’s what makes it fun.”
